With the March 1 statutory financial statement deadline daysaway for insurers, states continue to weigh in on how variationsfrom prescribed capital and surplus requirements will betreated.

In Virginia, the Bureau of Insurance of the State CorporationCommission issued a bulletin on Feb. 23 which addresses how it willhandle permitted practices of foreign insurers, those not domiciledin Virginia.

"It is my understanding that the Bureau has not nor does itintend on issuing any permitted accounting practices," said KenSchrad, a spokesperson for the commission.

The bulletin states that the bureau will be "closely monitoringFootnote #1 of the filed Annual Statements" which disclosesvariations from the NAIC's accounting practices and proceduresmanual.

The disclosure, according to the bulletin, "shall include adescription of the accounting practice, a statement that theaccounting practice differs from NAIC statutory accountingpractices and procedures, and the monetary effect on net income andstatutory surplus as a result of using an accounting practice thatdiffers from NAIC statutory accounting practices andprocedures."

According to the bulletin, "if an insurer's risk-based capitalwould have triggered a regulatory event had it not used aprescribed or permitted accounting practice, that fact should bedisclosed in the annual statement."

Finally, the Virginia Bureau states that if the permittedpractice is deemed "material" then the practice may not be allowedand the insurer could be required to re-file its annualstatement.

In California, no requests from the state's domestic insurershave been received, said Molly DeFrank, department spokesperson. Arequest for use of permitted practices would be reviewed accordingto the particular facts and circumstances of the insurer making therequest, she noted. That review would look at the appropriatenessof the request and whether documentation indicated that thepractice is "defensible and makes good economic sense," sheadded.

In Nebraska, one company has requested and will receive somecapital and surplus relief, Nebraska Director Ann Frohmanconfirmed. Ms. Frohman added that until financial statements arefiled and made public, she is limited on the information that canbe made public. However, she did say that the relief was notassociated with deferred tax assets. She added that it did involvework underway at the National Association of InsuranceCommissioner's Life & Health Actuarial Task Force.

Jim Connolly is senior editor for National Underwriter Life& Health magazine.